NALA Certified Paralegal Practice Exam

Liquidated damages are a predetermined and agreed upon amount of money to be paid in case of a breach of contract by one party. This amount is set to be a reasonable estimation of the damages that the non-breaching party would incur as a result of the breach. This is why options A, B, and D are incorrect.

Consequential damages, also known as indirect damages, refer to losses that are not a direct result of the breach but arise as a consequence of the breach. Punitive damages are meant to punish the breaching party and are typically not awarded in contract disputes. Compensatory damages are meant to compensate the non-breaching party for actual losses they have incurred as a result of the breach, but are not predetermined and are instead calculated based on the actual damages suffered. Therefore, liquidated damages are the most appropriate and specific term for the type of damages described in the question.